Just to be clear:

This is different than "freelancing" or "contract development". This is more traditional business consulting. You're going in and changing processes and structures more than anything else.

It might be around a specific goal like "make our signups more effective", but you're not just writing some code. You are going in an helping them to change their mindset by incorporating feedback (A/B testing) and new methodologies to run their business better. You get paid so much because the results don't just result in better signups, but in a transformed company at the end.

To do this type of consulting you need extreme credibility. Either a big business win, an ivy league education, or something equally as impressive.

This meme about there being "contractors/freelancers" and then "consultants" is toxic.

In the markets that Patrick and Jason Cohen and Brennan Dunn are talking about, almost the entire difference between "freelancer" and "consultant" is "how you price engagements".

It is true that consultants value-price engagements, so that they collect a percentage of the revenue or cost-savings derived from their code instead of a scaled hourly rate. And it's true that to do this, consultants have to think about the actual business context of their code, and be able to confidently propose the value of that code to a real business.

But that's where the differences end! Patrick is writing code on his engagements. He's using the same problem-solving methods you're using. On a day-to-day basis actually delivering for clients, he's writing code to generic metrics and then optimize them. The only thing he does differently from you is that he chooses to work on metrics where he knows he can make a case for revenue directly attributable to the metric.

It does not take a "big business win" or an Ivy education (WAT?) to "consult" for clients as opposed to "contracting" for them. You don't even have to be particularly attentive to your clients businesses, because so many people have built and written up methodologies for using code to make money for businesses; you can literally start by reading up on those, and offering them to clients who don't already do them. How many of your freelance gigs were for clients with sophisticated email marketing systems? How hard do you think it is to send triggered email updates to clients? Start there.

>>many people have built and written up methodologies for using code to make money for businesses

Would you mind pointing out some examples, or naming the field of literature? When I googled "optimizing business processes with software" I got a bunch of ads for software. I'm not entirely sure what I'm looking for.

Umm... well... for fear of stating the obvious, Patrick's blog (see TFA) would probably be a really good place to start. You should also watch every video at http://businessofsoftware.org/category/video-2 -- they are presented in the context of helping software companies become better but a lot of the ideas presented could be flipped around (I'm especially thinking of applying various forms of business analytics to more traditional companies).

Obvious or not, it hadn't occurred to me. I'll check out those videos, too. Thanks.

As someone who has both been and hired a lot of freelancers/contractors, I would say that there is a genuine difference in game level between freelancers and consultants. It's a matter of professionalism and willingness (and ability) to steer the project/engagement. Consultants are experts who come in and figure out how to achieve a goal, who investigate the clients' needs, who tell the client "these are the steps we will need to take to figure this out, and then to make it happen." At an advanced level, they will even help figure out the right goal to begin with.

Freelancers typically have to be told these steps by the client (and managed).

If you can come in and steer a project, and let the person hiring you relax his/her no doubt overworked brain for just a few hours, you can charge practically whatever you want. That's how we were doing $500+/hr (each) before we quit consulting, because I led the processes for our clients. They didn't mind paying $2k simply for meeting with us both for 2 hours because they got to be the subject of conversation, instead of the leader, and they'd get a valuable report out of it at the end (for an additional price, of course).

Never once had to worry about price shopping, because if that's the service you want, there is zero competition!

Foolishly, I thought this was just Normal Professional Behavior until I started hiring people for my business.

Sadly, it seems most people out there prefer the unprofessional and haphazard approach where they take on too much work/too many clients, wait for the client to tell them what to do, then jump between clients like a scalded cat to whichever project causes the most screaming at the moment.

I admire people who can execute this consultative approach (and, it should go without saying, I admire Amy Hoy's work in particular). If you can make $500/hr/person for talking sessions, I think you should do that.

But I want to take yet another opportunity to stab wildly at the idea that only people who can execute at this level are "consultants", and the rest "freelancers". Though I find the terminology a little silly, let's stipulate that those are the two words. Then: a consultant is simply someone who pitches projects with value-based pricing, and a freelancer is someone who pitches market- or cost- based pricing.

Start pitching value-based deals now. Don't wait until you feel like you're at Amy Hoy's caliber of delivery. That is literally the only thing you probably need to change in your practice to start transitioning towards being a high-value "consultant".

The only thing it takes to move from market- to value- driven pricing is a positioning change. You're stuck with market-pricing when you're doing something lots of other people do. So pick specialty practices or practice focus areas; it doesn't hurt if you pick focus areas that are "closer to the money" (conversion optimization is an obvious example), but even that's not necessary if you can drive your practice towards a desirable and underserved niche.

It's fine to deliver Rails or iOS contract software projects for market-based rates (they're pretty high right now), but that doesn't have to be all you do.

I don't think we're disagreeing here about pricing at all!

Lots of very good freelancers are undercharging and everybody should price on value delivered. (Especially those freelancers who disappear and only get work done when yelled at. If only!)

That's why a lot of the educational content I've used to promote Freckle is about delivering, understanding & capturing value… for freelancers. (Which includes understanding & identifying your ideal clients because if you use a hammer to break a window and steal $1 million in diamonds, it's worth a lot more to you than if you use it to hang your kindergartener's fingerpaintings.)

Any freelancer can become a consultant, though, by changing the way they work. Read a few books, take personal responsibility, experiment with being more than a tool for executing the client's vision. If you ask your client questions and debate features, that's already a good start.

This kind of consulting — consulting, as in the dictionary definition -- is a huge value and therefore hourly rate multiplier. Anyone who improves their management skills can vastly increase their rates.

If you only provide execution, and not the other stuff I described, you will hit a ceiling a lot sooner… and suffer more price comparisons. Not as many problems as a person who just says "I code in Ruby" rather than "I help your biz make more money," but more problems than somebody who approaches the biz like I did!

BTW - I rarely did just-talk engagements. All the stuff I described above was as part of design-dev projects. The process I came up with is as follows: We would meet the client, give them a fixed price quote ($5-10K) for these meetings and guidance and the report. They would pay 100% up front. The report, then, was a deliverable they could take to use with any other (cheaper) service provider to implement. Which, naturally, never happened, because as soon as the client saw how we ran our projects, they would never dream of hiring anyone else.

That's the power of being a consultant!

> If you ask your client questions and debate features, that's already a good start.

I've always been doing that, and felt uncomfortable to call this activity ‘programming’. Local clients (small businesses) hire a web developer to build a site, but it usually requires at least some education and research, as they rarely have good understanding of their needs. Still I'm shy to call it consulting except to myself. Your comment helped me understand better that it's almost exactly that consulting everyone talks about—thank you.

You mentioned books—can you recommend some titles, authors, or maybe subjects?

One book I found very valuable (and discovered on another HN thread) was Gerald Weinberg's "Secrets of Consulting." That book generated lots of good ideas. If you pause at the publication date, don't. You'd be shocked how little this stuff changes, until you realize (as Weinberg explains) it's always a people problem, and people haven't changed.

I also recommend Patrick's recent podcasts/interviews on the subject.

Thanks a lot for recommendations, the book looks very interesting. I have Patrick's podcasts in queue, and just realized that ahoyhere is Amy Hoy who was a guest on one of the episodes. =)

I'm interested in the fact that your clients never sought someone cheaper to execute the plans in your report. If one of the (or THE) difference between consultants like yourselves and freelancers is the research and strategy work, then wouldn't it matter less who executes that plan?

In other words, once you've come up with the strategy is there still extra value in it being executed at your rates, compared to a freelancer executing the same plan at a much lower cost?

You're assuming that the most important thing to clients is cost. For a decent client, it never is.

It's a huge amount of work and risk to hire somebody else after a service provider has already shown themselves to be self-managing, self-directed, professional, timely, responsible, and knowledgeable/skilled.

If I might humbly disagree: The only thing you need to do to sell consulting engagements is to sell consulting engagements. There is no licensing department, no exam, and no Client Cabal which requires that you be blessed by a gatekeeper prior to doing this. I spent years coming up with reasons why I could not sell consulting engagements. In retrospect, that was sort of silly.

You know what I did when I was a Systems Engineer and had business cards saying it? I read stuff, talked to people, went to meetings, produced computer code which compiled, and wrote stuff. You know what I do for clients? I read stuff, talk to people, go to meetings, produce computer code which gets interpreted, and write stuff. I'm just really, really picky about what I'm working on. (See sibling comment by Thomas.)

I've received MANY reader success stories from people who have simply adjusted their messaging from "I will write code for you" to "I will help you be more profitable (...as a result of writing the right code)." As far as I know, none of these successes pitched prior success with big businesses or their diploma.

This change in messaging lowers the risk factor between you and a potential client (throwing money at a coder doesn't always equate to business success), which in turn allows you to drive up your rates.